The Brutally Hard Resolution That Investors Should Make

What’s the most successful New Year’s resolution you ever made–and the least successful?

MANISHA THAKOR: By far and away the New Year’s financial resolution that has had the biggest impact on my personal finances is to rebalance my portfolio to bring it back in line with my target asset allocation.

This action step is psychologically brutal in that it requires you to sell by definition what has been “doing well” and to buy what has been lagging. Additionally, if you are doing this in your taxable accounts there are actual cash consequences when you realize gains that can create another psychological hurdle to get over.
That said, if you have done a solid job of assessing your current and future spending needs and have crafted an investment policy statement to support those needs–you owe it to yourself to stick to your plan. I like to think of it as getting a haircut. If you don’t trim your hair from time to time, it gets unruly. And paradoxically often by cutting your hair back, it grows more strongly and healthily going forward.

My least-successful financial resolution? To lighten up, be in the now, and splurge more on myself during the year. (My inner budgeter is a strong task master!)